California insurance law now in place
In December 2012, the California legislature passed insurance deregulation bill AB 2354, which became effective on 1 January of this year. Stefan Mohamed considers the implications of the changes
The American Society of Travel Agents (ASTA) and the California Coalition of Travel Organizations (CCTO), which helped to push it through, have expressed their enthusiasm for the bill, which enables travel agencies to offer travel insurance to California consumers without the need for a state-issued license. The two groups have also issued new guidelines, supplementing guidance provided earlier by ASTA.
At this point, providers of travel insurance should have contacted all California travel agencies as, under the new law, insurers need to submit a list of their insurance selling agents and make specific declarations to California’s Department of Insurance, and travel agencies that have not been contacted by their insurance providers need to reach out to them, according to ASTA and the CCTO. “With regards to travel agents in California that offer travel insurance to customers located in other states,” said an ASTA spokesman, “there is no clear consensus amongst travel insurance providers or regulators regarding how travel agencies should fulfill their non-resident insurance licensing obligations.” ASTA added that it is working with the US Travel Insurance Association (UStiA) in order to seek more clarity regarding this issue, as ‘the lack of clarity as to how California travel agents should comply with non-resident licensing, as well as one large travel insurance provider’s recent nationwide restructure of its regulatory licensing programme, clearly illustrates the need for overhauling the outdated, confusing and costly state-based web of regulators’. ASTA also suggest that it ‘shows the need for the nationwide adoption of a standard and uniform regulatory regime’.
A coalition of UStiA members, including ASTA, have been working to implement new standards across the country – currently, California, Kansas, Kentucky, Idaho, Minnesota and Florida have adopted variations of these standards, and ASTA is hoping that it will be introduced in a further dozen states this year. Though two different sets of standards have been decided – the National Association of Insurance Commissioners and the National Conference of Insurance Legislators – they are sufficiently similar that they are jointly referred to as NAIC/NCOIL, and they reflect the fact that, in some US states, licensing requirements are regulated by insurance commissioners, while in others, these requirements are enacted by state legislature. One example illustrating this is that Washington’s new rules involved regulatory changes, while those of California and Virginia were enacted by legislature.
Ultimately, the goal is for all states to allow agents to sell travel insurance without the need for a license, rather than requiring the so-called ‘limited line license’ that is currently needed. One issue that both the states and the UStiA/ASTA are facing, however, is that of licensing models forced into obsolescence by the continuing evolution of retail travel – up until the last decade, agencies did their business locally, whereas nowadays many have huge books of business spread across multiple states. The UStiA’s Jack Zemp, chairman of its law and regulations committee, says that travel agents ‘are not acting like fully-fledged insurance agents’, rather they are simply offering information. “They’re not acting like a State Farm insurance agent,” he adds.
Concerns have been raised, however, that while there is still uncertainty surrounding licenses and regulations, travel retailers could be prohibited from merely mentioning, for example, trip cancellation or interruption insurance to clients that reside in a state where the agent or agency is not licensed to sell insurance. Clients that then suffer a loss could end up taking legal action against the agency. The bottom line is that confusion helps nobody – not consumers, not travel agencies – and any drive for clarification is a step in the right direction.